Greater New Orleans

Refinery will get $1 billion upgrade

STAFF PHOTO BY BRETT DUKEValero Energy Corporation has announced a $1.4 billion expansion of its St. Charles Parish refinery.

By Matt Scallan River Parishes bureau

Valero Energy Corp. has announced a $1.4 billion expansion of its refinery in St. Charles Parish.

The expansion of the Norco refinery, which involves construction of a new hydrocracker and expansion of its coker unit, will boost production of ultra-low sulfur diesel fuel by 49,000 barrels and gasoline by 11,000 barrels, per day.

"It's a good location for us because we have room to expand on site and the location is good for our Gulf Coast markets," said Bill Day, spokesman for the San Antonio company. The company, the largest refiner in the United States, owns 18 refineries in the United States, Canada and the Caribbean.

The expansion will create 30 to 50 permanent jobs and as many as 2,000 construction jobs during the two-year project, company officials said. The refinery now employs 600 people. The project is expected to be finished in late 2010, Day said.

The project will increase the refinery's capacity from 250,000 to 300,000 barrels of oil per day, Day said.

That would make the refinery the 12th largest in the United States, according to Jan. 1 production figures compiled by the U.S. Department of Energy.

The company plans to focus on producing diesel fuel under new federal standards because it sees more growth in that sector of the market than in gasoline, because of ethanol blending, Day said.

Larry Wall, spokesman for the Mid-Continent Oil and Gas Association of Louisiana, an industry group, said the new federal diesel standards have made the production of the fuel more profitable because less is being produced.

"It's not a shortage, but it is a tighter market," Wall said.

Because of rising oil prices and tight refining capacity, many of the nation's refiners have been adding on to refineries. The Marathon refinery in Garyville broke ground on a $3.2 billion expansion in March.

Valero, which acquired the Norco refinery from Orion Refining in 2003, applied for the expansion permits in October 2006. The company's board of directors approved the project last month, Day said.

A hydrocracker uses heat and hydrogen to break down heavier elements of crude into diesel and kerosene, the major component of jet fuel.

A coker unit is designed to wring out the last light molecules of the crude oil into other forms of fuel. What is left resembles and burns like coal.

The company has done a good job of informing nearby residents about the project, said Edward Burks, president of the New Sarpy Civic Association.

"They have to let us know what's going on," Burks said. "They've been a good neighbor."

The construction will take place along Prospect Road on the opposite side of the refinery's 1,000-acre site from the community.

In addition to the 10-year property tax exemption for industrial expansion for which the plant is eligible, the company also has applied for tax breaks via the federal Gulf Opportunity Zone legislation. However, the company has not received the state approval necessary to receive those tax breaks, which involve accelerated depreciation of its investment.

Parish President Albert Laque said Wednesday that the investment in the community is good news for the parish.

"I would say that they will be paying sales and use taxes on at least 40 percent of that $1.4 billion," he said.

Laque praised the company as a good neighbor in the parish. "I think this says that they like the way the parish is run, and we're happy to have them here," he said.

The down side is that the project is likely to tighten the demand for skilled construction workers, which drives up the cost of parish construction projects, he said.

Corey Faucheux, the parish's economic development director, said Wednesday that the expansion is only the latest in a long trend of heavy and light industrial expansion in the parish in recent years, including improvements at Dow, Monsanto and International Matex Tank Terminals, as well as the companies that serve them.

"In the last 14 years, we've added 3,000 jobs in this parish, and keeping the ones that we have, which is a lot easier than bringing in somebody new," he said. "These are the kind of high-wage, high-benefit jobs that most places in the state would love to have."

Matt Scallan can be reached at mscallan@timespicayune.com or (985) 652-0953.